Market power, technical progress and financial fragility

Domenico Delli Gatti, Mauro Gallegati, Antonio Palestrini, Gabriele Tedeschi and David Vidal-Tomás

Journal of Economic Behavior & Organization, 2024, vol. 217, issue C, 435-452

Abstract: We explore the nexus of market power, innovation and financial fragility by means of a macroeconomic agent based model whose core is the Dixit-Greenwald-Stiglitz (DGS) theory of firm behaviour, which nests the Greenwald-Stiglitz characterization of the firm as a borrower that runs the risk of bankruptcy in the Dixit-Stiglitz monopolistic competition setting. The optimal firm's size is increasing with net worth and productivity. Net worth increases with profits while productivity increases through R&D and innovation. Simulations show that in the presence of market power firms are more innovative and financially robust and less prone to bankruptcy. These features have not surfaced so far in standard characterizations of monopolistic competition.

Keywords: Market power; Net worth; Productivity; Debt relief (search for similar items in EconPapers)
JEL-codes: E32 E37 E43 L11 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268123003979
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:217:y:2024:i:c:p:435-452

DOI: 10.1016/j.jebo.2023.10.037

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().